How To Fix a Toxic Culture Within a Franchise

How To Fix a Toxic Culture Within a Franchise

I’ve found myself in more than my fair share of ‘combative’ environments with franchisees over the years. In some cases, I was brought in specifically to salvage relationships with rogue franchisees.

(I don’t relish those situations, but trouble does seem to follow me!)

Franchising success is all about human relationships. The culture you create at your franchise business will determine the strength of your relationships with your internal teams and your franchisees.

If you aren’t seeing the results you want and business feels more fraught than it ought to be, then that’s a symptom that your culture may not be where you need it to be. To transform your results, you may first need to transform your culture. Which as we’ll explore, is easier said than done!

So, we first need to identify what we mean by culture. By my definition, to determine culture is to answer: how are we going to be? How will we be judged? What environment do we want to create?

If you’re just setting out in franchising, being clear about this at the outset means you don’t need to transform the culture further down the line. If you’re at the beginning of your journey, start as you mean to go on.

But if you’re already established and have found yourself in a place where your culture isn’t where you want it to be, then it’s time to outline what that culture will look and feel like. You can then create a plan to take you from your current situation, with the culture that you have right now, to where you want to get to.

Culture emanates from the top. It’s not just what you say, but what you do. The culture you are trying to instill will reflect values and the behaviors you see around you on a day-to-day basis. It’s a huge accumulation of TNT’s (Tiny Noticeable Things), not a collection of fancy words. TNTs are like dynamite, but in a positive way.

Actions speak louder than words, and the regularity of those actions matters. It’s easy to put this stuff on the walls of your office, or to state it in meetings, but living and breathing your desired culture takes focus and commitment.

The Acid Test

The real test of your culture are the decisions that are made when ‘pocket-first’ opportunities come along. For example, you might talk about ‘integrity’ being one of your values, but the real test is when a ‘short-term gain’ opportunity comes your way. Perhaps you receive an enquiry from a potential franchise partner who clearly doesn’t fit your system. The potential franchise partner is excited and keen to sign up. What do you do?

To act with integrity you have to tell them the truth (with care and empathy). You’re sacrificing immediate income, but gaining profitability in the long term. This is, of course, difficult to do. (And mistakes will always be made). But if you aren’t acting in alignment with your stated values, nobody will ever take them seriously!

In one of the first franchise businesses I worked in, we tried to create a culture founded on reciprocity and sharing. We wanted a culture where the franchisor and franchise partners worked together in an interdependent relationship. Neither party can survive or achieve its full potential without working together, so it’s a collaboration.

To do that effectively, there has to be a culture where franchisor and franchise partners are considered peers; that we all work together for one common goal. As a franchisor, you must work hard to encourage the required behaviors. Of course, sometimes this can cause problems. For instance, you may have a franchise partner who doesn’t want to share information because they think other people are going to benefit.

Cultural transformation ultimately comes back to mindset. If you’ve got an abundance mindset, then you’ll share freely and you’ll put everything into the pot. But if you are coming at things from a scarcity mindset, then you might be tempted to hold things to yourself. This could be something you’ve discovered, some new way of working, or an evolving best practice. With a scarcity mindset, you keep it to yourself because you don’t want other people stealing what you perceive to be yours.

So to transform the culture you must first define the culture you want to create. Then building on that, what behaviors do you expect to be displayed as a result of that culture? The transformation begins with you living and breathing your desired culture yourself. It’s essential to get your own house in order before considering your franchise partner ecosystem.

The prevailing culture starts with you as the franchisor, and it starts from the top. Working downwards, it has to be lived and breathed with every single member of the franchise support team. If your actions at every level don’t back up your words, transformation will be impossible.

For instance, imagine you have a stated culture about only recruiting top-quality franchise partners. Imagine then that somebody comes along saying they want to invest who doesn’t meet those standards. If you welcome them into the network with open arms, having accepted payment, that’s a pocket-first behavior. Taking those decisions destroys the culture you are trying to create, because as humans see through the decision. People will judge you by your actions, not by your words. It doesn’t take any time at all to see who is living and breathing the culture that has been defined, and who is not.

All of this starts with you as the franchisor. Rather than trying to define and control the culture, or engaging in virtue-signalling behaviour, you’re leading by example.

Fixing a Toxic Culture

So what if you’re not starting out and the culture has already become toxic? Well, you have to first start by uncovering what happened to create that toxicity. These could be simple things or major incidents. Either way, the impact on profitability is usually huge.

When you break trust, or if you are not committed to building open relationships, it is easy to lose trust. Worse than that, trust and reputation are hard to regain. It doesn’t take many instances of not living and breathing the culture for people to disengage. If left unaddressed, you end up with a culture of toxicity that needs to be transformed.

So let’s say you want to transform a broken culture. What are the first steps?

Well at the outset, you have to really want to create successful, profitable, interdependent relationships between franchisor and franchisees. In that context, you first need to recognise and acknowledge what has gone wrong in the past. Don’t hide anything: put everything on the table rather than trying to defend it. Put your hands up and say what you or your predecessors have got wrong, whatever that may be. If you’ve got things wrong in the past, you need to be prepared to dig deep and do whatever it takes to win that trust back.

What comes next can vary. The toxic culture could be very recent, with one or two specific root causes, or it could be deeply embedded. But in my experience, rebuilding can take months, if not years. In the worst-case scenario, it took more than two years to get to a point where there was a level of trust! Which of course was an extreme case, but it can happen.

The whole subject of culture is something that can be easily overlooked, particularly when there is a management change. It’s easy to dismiss the issues and blame the old regime, but I’d encourage you not to hide behind this. In the example above the business had recently been sold. The original culture disappeared with a new owner, so I was hired to come in and sort out the resulting mess.

Develop a Positive Exit Management Process

The culture of an organisation must be followed from cradle to grave. Franchise partners will inevitably at some point exit the business, for a wide variety of reasons.

In the past, I’ve been responsible for networks of more than 150 franchise partners. With that type of network you’re going to see all aspects of life played out. You’re going to have births, deaths, illness, mental health issues, and everything else you can imagine. Despite your best efforts, sometimes running a franchise is just not for some franchisees. Often the reality isn’t what they thought, which leads to underperformance plus all sorts of strains.

If your culture is to be open, honest and act with integrity, then it’s best to lead them towards a face-saving exit. This could be exit as a resale, or it might be exit through ill health. But it’s incumbent on the franchisor to create a culture where you always strive for a positive exit management process. Which sounds simple, but is hard in practice. You need to invest time now in deciding how you’re going to manage these things.

Without a positive exit management process, you WILL end up with a culture that needs transforming. You’ll end up with franchise partners (who feel trapped) lashing out and blaming you as the franchisor for things not going well. You’ll end up in disputes and acrimonious conversations. In the worst-case scenario, you’ll end up in legal disputes. All of these things are avoidable and are symptoms of foundational cultural problems.

Before franchising, my first career was in nursing. When you visit a nurse or GP, you will present with an array of symptoms. Just like in nursing, it’s incumbent on franchisors to identify the root cause of the observable symptoms in your network, positively or negatively. If it’s positive, you want to understand what that is because you want to do more of that. If it’s negative, you want to understand because you want to eradicate it. This is why culture deserves a place at the boardroom table so that it’s tracked and monitored at the highest possible level.

As a franchise business grows it’s easy to lose the culture from the early days, especially when the founder no longer exerts such an influence on the business. (This issue of scale isn’t unique to franchising, it’s the same in the corporate world.) But the more you scale up, the more distant the founders become from the implementation of systems. When you’re bringing on your 5th franchise partner, perhaps culture doesn’t matter so much. But by the time you’re bringing on your 500th franchise, it’s mission-critical and a board-level discussion.

It’s easy or tempting to assume that culture will simply take care of itself – but without deliberate action this simply doesn’t happen. If and when you’ve got it wrong, there needs to be a program of transformation from wherever you are back to where you want it to be, with clearly defined actions and metrics. Once you’re operating at scale this transformation requires a sustained, systematic approach, because you’re dealing with the irrationality of human behavior.

Remember also that transformation will nearly always take time. It takes time to create a sustainable, lasting change that will deliver the results everybody needs, including profit. Profit is the reward that comes out of creating your desired environment.

In my next article, we’ll look at why culture deserves a space at your boardroom table.

The Franchology® purpose statement is ‘transforming franchising together’. I honestly believe that Franchisors who are driven by purpose, have an amazing opportunity to make Franchising the number one growth strategy globally!

If you feel inspired to be part of that exciting journey, I would love to hear from you, so please get in touch here to arrange a no-obligation coffee and a chat.

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